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The key stage of trade negotiations between the US and China, the release of the fourth quarter Green Inflation data and the question of whether US stock indexes can continue to rally, which directly affects the global risk appetite, allows the Australian dollar to claim the title of the most interesting currency of the week. Heats interest in it and the return of demand for carrying trade operations. Let the yield of Australian bonds inferior to US counterparts, but the "Aussie" on this indicator is still among the top three among the G10 currencies.
China is the largest sales market for the Green Continent, so it is not surprising that in the context of trade wars and the slowdown of the economy of the Middle Kingdom to the lowest levels over the past three decades, Ozzy became one of the main outsiders of the G10 in 2018. The situation was aggravated US stock market, which forced investors to discard risky assets. In January, the situation changed. The Fed, with the help of "pigeon" rhetoric, managed to calm the financial markets, while the start of negotiations between Washington and Beijing, as well as the optimism of Donald Trump, extended a helping hand to the bulls on AUD / USD.
The state of the Australian economy leaves a double impression. On the one hand, the labor market looks healthy, and falling unemployment to 5%, provided inflation accelerates, opens the way for RBA to an increase in the cash rate. On the other hand, the share of household debt in disposable income from the 1990s increased from 67% to 189%. This allows the derivatives market to issue a 50% chance of easing monetary policy, and HSBC and Rabobank forecast a fall of AUD / USD to 0.66 and 0.68 by the end of December.
Dynamics of AUD / USD and the share of household debt in disposable income
Most likely, both the Reserve Bank of Australia and the Fed will keep rates at the current level, at least until September, which suggests that the fate of the analyzed pair will depend on the external background. And we are talking not only about trade wars but also about resuscitation of investor interest in carrying trade operations. Historically, their effectiveness was higher than the passive management strategy in the US stock market. The game on the difference brought income for 12 of the last 18 years. Currently, the reduction in the volatility of financial markets and the growth of global risk appetite increase interest in it, which contributes to the strengthening of the Australian dollar.
According to Moody 's, all the leading central banks of the world have adopted a waiting position. The Fed pauses in the normalization process, the ECB is unlikely to raise the refinancing rate before 2020, the Bank of Japan remains committed to an ultra-soft monetary policy. This behavior of regulators gives financial markets the necessary liquidity and supports the demand for earning assets.
Technically, a breakthrough of resistance at 0.7235, the activation of the "Perfect Butterfly" pattern with a target of 127.2% followed by the release of AUD / USD quotes beyond the descending trading channel strengthen the risks of continuing the rally.
AUD / USD, the daily chart
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